Hong Kong, China – Rumours that the Hong Kong dollar will be unpegged from the United States dollar percolate through local brokerages. Thousands of middle-class families have sold their flats and cashed out for a new life abroad. Hong Kong’s powerful developers cringe when Beijing demands that they alleviate the territory’s housing shortage.
Over the past year, Hong Kong’s society has been torn apart by the Beijing-imposed national security law and changes to the electoral process designed to ensure only people deemed “patriots” can hold office in the territory.
Now attention is turning to whether its famously free economy and status as a global financial centre can survive.
Observers are not optimistic.
“Economic freedom without democracy and other freedoms is not stable in the long term,” said Fred McMahon, a resident fellow with the Fraser Institute, an independent non-partisan think-tank in Canada.
Last month, the institute’s annual report on economic freedom still crowned Hong Kong’s the freest economy in the world, but it pointed to the national security law and the city’s “descent into tyranny” as threats to holding on to the title for much longer.
“The key aspect of economic freedom is the rule of law, which doesn’t bow to power but enforces justice and independence of the government,” McMahon told Al Jazeera. However, for the Chinese Communist Party “the law is subservient to politics,” he added.
Last year, The Heritage Foundation, which for decades toasted the city as the poster child of laissez-faire economics, dumped Hong Kong from its ranking.
Within months of the security law coming into effect, Next Digital, a thriving business that published the popular pro-democracy Apple Daily, was forced to close after owner Jimmy Lai was accused of “colluding with a foreign power”, and the company’s assets were frozen.
While Lai is behind bars awaiting trial and has since been charged with other offences, businesspeople are wondering whether the tycoon’s prosecution under the new law proves to be a singular exception – or the proverbial canary in the coal mine.
“This is a special case that has put the international business community on guard,” said George Cautherley, vice chairman of the International Chamber of Commerce – Hong Kong. “They’re waiting to see if the government will go further than this and how this is going to evolve.”
Hong Kong’s economy still seems to be humming along for now, but Beijing’s recent mainland crackdowns on tech giants, tuition centres and debt-binging real-estate developers have raised suspicion about what might be in store.
Assuming history is any guide, it could be only a matter of time before Beijing extends its interest to Hong Kong’s economic affairs.
A case in point: The national security law was promulgated in mainland China only a few years before it was imposed on Hong Kong, bypassing the territory’s own elected legislature.
More recently, the city’s “big four” developers, faulted for some of the world’s highest home prices and smallest flats, were told to do their bit to solve the territory’s housing problems.
For businesspeople, there is also the spectre of the past: when China was a command economy and private ownership outlawed.
“Businesspeople are worried perhaps not so much as their own personal freedom as the value of their assets invested in Hong Kong and China,” said Joseph Lian, former commentator and top editor at the city’s business press who now teaches economics at Yamanashi Gakuin University in Japan. They “would be in for a tough ride”, he said.
But it is not only the well-heeled who worry. Middle-class families convulsed by the crackdowns are also looking to protect their money and investments.
Tens of thousands of Hong Kong people who are planning to emigrate have put up the family flat – often their most valuable asset – for sale. Some – and not only those who are planning to leave – are also opening offshore bank accounts out of concern that the territory may soon be subject to the same kind of capital controls as the mainland.
The world’s longest and most costly quarantine mandate – between 14 and 21 days in a hotel for all residents returning from overseas – has also been weighing on the minds of business and once-regular travellers.
The European Chamber of Commerce warned earlier this month that many of its member companies were considering relocating some of their operations elsewhere – including Singapore – because of the mandate, which the local government has shown little willingness to relax even for the fully vaccinated.
Chief Executive Carrie Lam has hammered home her objective of aligning the city’s pandemic control with the mainland’s zero-COVID goal – whatever the cost.
But the price of an increasingly restricted economy could end up being hefty.
Hong Kong’s separate economic system has long underpinned its status both as China’s most important financial hub and a global one.
But with the territory on an ever-shorter leash from Beijing, Lian expects the investment dollars that propelled it into pre-eminence over the last half-century could soon give way to an influx of speculative funds, known as hot money.
“A mature financial centre has a lower proportion of hot money; Hong Kong may be going in the opposite direction,” said Lian. “It may still make money for a lot of people; casinos do, too, but that’s not what a financial centre is for.”